Why Princely Intern Pay Is an Indicator of Trouble for IT Sector

NEWS ANALYSIS: By being perceived as overly extravagant, big IT companies will be the first ones blamed for a new tech bubble burst when it happens. by being perceived as extravagant, these companies will be the first ones blamed for it, whether or not they are actually guilty of touching it off. - See more at: http://www.eweek.com/news/why-princely-intern-pay-is-an-indicator-of-trouble-for-it-sector.html#sthash.JmDVshY7.dpuf by being perceived as extravagant, these companies will be the first ones blamed for it, whether or not they are actually guilty of touching it off. - See more at: http://www.eweek.com/news/why-princely-intern-pay-is-an-indicator-of-trouble-for-it-sector.html#sthash.JmDVshY7.dpuf

tech bubble interns

We are justifiably proud of our free-market economy here in the States. A person has the right to earn whatever he/she can negotiate, as long as an employer is willing to pay the price.

This is a good thing for most people, most of the time.

Looks like Silicon Valley tech companies are quite willing to pay the price--make that any price--for talent, even if the talented person is only a high-school student with little or no professional experience.

Glassdoor.com, whose job it is to know these things, came out recently with a study that lists the highest-paying companies for interns, many of which are in the tech industry. Somebody at Bloomberg News dug this up and reported it July 9.

Several Companies Paying $6K or More Per Month for Interns

According to Glassdoor.com, Bay Area-based Palantir--a Palo Alto, Calif.-based financial services analytics provider--ranked highest with an average monthly intern salary of $7,012. That is correct. Right behind it is Twitter ($6,791), followed by Facebook ($6,213), Microsoft ($6,138), Google ($5,969) and Apple ($5,273).

This type of news simply adds to the consternation of many hard-working people who already feel completely shut out by the extreme wealth being generated in Silicon Valley.

There was a time when compensation from internships was paid in real-life experience on the job. In fact, that time is still here in most businesses of the world, but it's no longer true in many places in lofty Silicon Valley.

No wonder there are organized protests in San Francisco over the outsized influence of tech companies that, along with their employees, bid up prices of both commercial and residential property. Long-time residents are protesting over being pushed out of rental apartments and being unable to afford to buy sky high-priced local homes.

Then the tech companies add insult to injury with corporate luxury buses using city streets and bus stops to pick up and whisk employees off to corporate headquarters.

Internship Salaries Exacerbate Frustrations

News of these out-of-control salaries for high school kids is only going to heighten the resentment.

Many of these are teenagers getting paid way more than longtime professionals around the country in IT and other fields. We understand that it's all about the laws of supply and demand; there are not as many people qualified to do some of the internship-type jobs at big IT companies as there are qualified to work as barristas or french fry makers. We know that.

But what are these kids going to expect after they graduate high school--if they graduate high school--and college? Why should they continue their educations if they can make hundreds of thousands of dollars a year merely writing code?

We also need to assume that these kids are mostly working only a couple of months during the summer. And there is a shortage of details in the current reports about who these kids are and what exactly they are doing to earn such princely salaries.

eWEEK determined that some of the interns in the Glassdoor research have MBAs and degrees in computer science, and that they're all not teens. But the fact is that these are all young would-be professionals.

There's a Bigger-Picture Problem

All of this is merely one indicator of another, much larger problem.

Overall, this business environment is looking more and more like another market bubble is about to burst, and by being perceived as extravagant, these companies will be the first ones blamed for it, whether they are actually guilty of touching it off.

Upon what do I base this assessment? Three key factors: The current spate of huge IT company valuations, including many startups without proven profitability or even near-term prospects for profits; an ultra-loose venture capital market with lots of stored-up cash; and a constant craving for IT stocks by Wall Street and international investors.

Perhaps the most telling is the fact that the last tech industry bubble, 15 years ago, is almost out of the memory window for many young professionals.

We Have Short-Term Memories

Off our screens, out of mind. That's how it works. Our computers have replaced our memories in so many ways.

Here is just one recent example: Box, the popular cloud storage and collaboration service, is a promising company, no question, but it has 4.18 million customers and hasn't made a profit in nine years of business. It just banked another capital infusion of $150 million on July 7 and now has piled up $546.1 million in venture capital during its lifetime. Despite zero profits, it owns a sterling $2 billion valuation and a sparkling new office in Los Altos, Calif.

How about Twitter? There's another one that's never made a profit, yet it has a $22 billion valuation. We could go on for a long time in this thread.

Hardly a week goes by without news of huge VC investments in startups or young companies with little or no track record. You can find them throughout eWEEK. That's what was happening with regularity from 1995 to 2000, when all hell broke loose in the IT sector and elsewhere.

We rarely learn from our history. Humankind has proven this over and over.

This Has Happened Before; We Need to Be Reminded

When the next bubble bursts--and it will, hopefully to a lesser extent that last time--the public perception will be that Google, Microsoft, Twitter, Apple, Facebook, LinkedIn and all the others were too intoxicated with their wealth to see the reality of the rest of the world.

Do not forget that these companies--even the biggest names in the business--come and go with astonishing regularity. It wasn't that long ago that SGI, Sun Microsystems, DEC, Compaq, Atari and 100 other very profitable companies were basically in the same position as Google and Apple of today.

In fact, Apple has already been among the downtrodden previously (1992-97, to be exact, when it was begging for help). Its turnaround has been the stuff of legends, but that company is a notable exception to the rule. Of course, Steve Jobs was a great exception to the rule, too.

The intern salary story is a mere microcosm of so much more beneath the surface. This conversation, too, isn't over.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 15 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...